What The Top U.S. Companies Pay In Taxes How can it be that you pay more to the IRS than General Electric?
As you work on your taxes this month, here’s something to raise your hackles: Some of the world’s biggest, most profitable corporations enjoy a far lower tax rate than you do–that is, if they pay taxes at all.
The most egregious example is General Electric ( GE – news – people ). Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.
How did this happen? It’s complicated. GE’s tax return is the largest the IRS deals with each year–some 24,000 pages if printed out. Its annual report filed with the Securities and Exchange Commission weighs in at more than 700 pages.
Inside you’ll find that GE in effect consists of two divisions: General Electric Capital and everything else. The everything else–maker of engines, power plants, TV shows and the like–would have paid a 22% tax rate if it was a standalone company.
It’s GE Capital that keeps the overall tax bill so low. Over the last two years, GE Capital has displayed an uncanny ability to lose lots of money in the U.S. (posting a $6.5 billion loss in 2009), and make lots of money overseas (a $4.3 billion gain). Not only do the U.S. losses balance out the overseas gains, but GE can defer taxes on that overseas income indefinitely. The timing of big deductions for depreciation in GE Capital’s equipment leasing business also provides a tax benefit, as will loan losses left over from the credit crunch.
But it’s the tax benefit of overseas operations that is the biggest reason why multinationals end up with lower tax rates than the rest of us. It only makes sense that multinationals “put costs in high-tax countries and profits in low-tax countries,” says Scott Hodge, president of the Tax Foundation. Those low-tax countries are almost anywhere but the U.S. “When you add in state taxes, the U.S. has the highest tax burden among industrialized countries,” says Hodge. In contrast, China’s rate is just 25%; Ireland’s is 12.5%.
Corporations are getting smarter, not just about doing more business in low-tax countries, but in moving their more valuable assets there as well. That means setting up overseas subsidiaries, then transferring to them ownership of long-lived, often intangible but highly profitable assets, like patents and software.
As a result, figures tax economist Martin Sullivan, companies are keeping some $28 billion a year out of the clutches of the U.S. Treasury by engaging in so-called transfer pricing arrangements, where, say, Microsoft’s ( MSFT – news – people ) overseas subsidiaries license software to its U.S. parent company in return for handsome royalties (that get taxed at those lower overseas rates).
“Corporations are paying lower amounts of their profits in taxes now than in the past,” says Douglas Shackelford, who teaches tax law at the University of North Carolina at Chapel Hill. “Other countries have been lowering their rates, but not the U.S.”
Mind you, not all global megacorps enjoy such low tax rates. Try to muster some pity for Big Oil. ExxonMobil ( XOM – news – people ) in its 2009 annual report to the SEC, recorded a larger income tax expense than any other U.S. company last year, some $17.6 billion, or 47% of pretax earnings. Exxon’s peers Chevron ( CVX – news – people ) and ConocoPhillips ( COP – news – people ) likewise recorded similarly high effective tax rates. The oil companies are oddities among the multinationals because many of the oil-rich countries where they do business levy even higher taxes than the U.S.
Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. Exxon has tens of billions in earnings permanently reinvested overseas. Likewise, GE has $84 billion in overseas income parked indefinitely outside the U.S.
Though Exxon’s financial statement’s don’t show any net income tax liability owed to Uncle Sam, a company spokesman insists that once its final tax bill is figured, Exxon will owe a “substantial 2009 tax liability.” How substantial? “That’s not something we’re required to disclose, nor do we.”
Naturally the Obama administration wants to put an end to this. It has proposed doing away with tax deferrals on overseas income. If the plan passes, a U.S. company that pays a 25% tax on profits in China would have to pay an additional 10% income tax to Uncle Sam to bring it up to the 35% corporate rate. “Eliminating deferrals would put U.S. companies on an unlevel playing field,” says the Tax Foundation’s Hodge, “especially if competing with the likes of Germany, which only taxes companies on domestic operations.”
Hewlett-Packard ( HPQ – news – people ) and others among the top 25 state in their annual reports that if Obama’s tax measures pass it would mean a certain tax hike, probably amounting to billions of dollars.
Would no more tax holiday for GE really end up helping Mr. and Mrs. Taxpayer? Doubtful. “The average Joe should be in favor of lower corporate taxes,” says Hodge, “because ultimately they are paying the corporate income tax. Either as workers, getting lower wages and fewer jobs, or as consumers, paying higher prices, or as retirees, getting lower dividends and earnings on their investments.”
In the same vein, JPMorgan Chase ( JPM – news – people ) Chief Executive Jamie Dimon has spoken out against an Obama proposal to levy a special tax on banks to recoup bailout costs. “Using tax policy to punish people is a bad idea,” said Dimon. “All businesses tend to pass costs on to customers.”
There, now doesn’t that make you feel a lot better…
The State of California is planning “Reagan Day”. If I understand correctly, this is a holiday where we all max out our credit cards, give guns to the local mosque, have sex with a person we call “Mommy”, and then fall asleep and forget all about it the next day. Here’s the full story:
California is one step closer to establishing an annual day honoring Ronald Reagan, the former president, governor and actor.
The state Senate on Thursday unanimously passed a bill designating Feb. 6 as Ronald Reagan Day. It encourages schools to spend the day commemorating Reagan’s life and accomplishments.
The legislation, which heads to the Assembly, is one of three Reagan-themed bills Republican lawmakers hope to pass before Feb. 6, 2011. That would have been the 100th birthday of the conservative icon, who died in 2004.
Ronald Reagan Day would be the third special day of recognition in California dedicated to an individual.
The first honors conservationist John Muir. Last year, lawmakers honored Harvey Milk, a gay activist and former San Francisco supervisor who was gunned down at city hall in 1978.
Ya’ know, I think this may be pretty accurate for most guys who’ve been married as long as I have, but I think I’d personally enjoy a “Clinton Day”. If you know what I mean…
Perhaps the only thing more pathetic than giving up on your new blog after only 5 short months, is crawling back after a 5 year hiatus to try and start over. Actually, I suppose one thing even more pathetic would be quitting on your short lived blog because you were so insanely pissed at the political climate you could no longer think straight.
Even though I know nobody reads this thing but me, I am still embarrassed at many things I said here back in 05’. I’m not embarrassed because I think I was wrong, not at all. In fact I still believe very strongly that former President Bush was a disastrous president for America, and I am still disgusted that America re-elected him for a second destructive term. My embarrassment however, is because this was supposed to be a blog about my family and our day to day lives – but instead I allowed it to morph into a place where I would regularly vent my anger at the Bush administration (far more often than I even mentioned anything to do with my family).
I’m going to try and keep my political rants to a minimum this time. Wish me luck.
A lot has happened since my last blog post in 2005. The biggest news story of 05 was, of course, Hurricane Katrina. This was probably the final straw that put me over the top concerning the Bush administration and ultimately led to me bailing on this blog altogether. Katrina was Bush F-up # 1,894,672 and I had decided to step back from my blog and take a break – that lasted 5 years. Anyway, I’m not gonna’ get into Katrina right now or else I will have to start taking blood pressure meds.
Other big news in 2005, Pope John Paul II died, John Roberts was sworn in as Chief Justice of the Supreme Court and Lewis “Scooter” Libby, Dick Cheney’s Chief of Staff, agreed to take the bullet for his boss and was indicted for perjury and obstruction of justice. Of course this national traitor was all but pardoned by Bush, er, must…keep…blood…pressure…in…check. On the plus side, in 2005 my family and I took our first ever Staycation, looooong before they became trendy with the global economic collapse three years later.
In 06’ another criminal in Bush’s cabinet was forced to resign, this time Donald Rumsfeld (I’m not doing as well as I had hoped, regarding staying on the topic of my family and daily life). 2006 was a bad year overall for Republicans as several Republican congressmen were brought down by scandals, including Mark Foley, who resigned over sexually explicit messages sent to underage boys, and Randy Cunningham, who pleaded guilty to accepting bribes from defense contractors. House Majority Leader and Good Ol’ Texas Boy Tom Delay resigned after being indicted on campaign finance charges, and Ohio’s Bob Ney pleaded guilty in connection with the probe of lobbyist Jack Abramoff. Plus, Dick Cheney shot his friend in the face while on a canned hunt. Then the Democrats all but swept the mid-term elections. Yea, you could say that 2006 was a bad year for the Red Team.
In family news, 2006 was an incredible year as I became a home-school parent. Home schooling a child is probably the most difficult thing I’ve ever done, although my daughter is a great student which probably makes it a lot easier on me than it could be. You can expect to see many posts on this topic coming soon as it has become a huge part of my life.
In 2007 O.J. finally went to jail, Miss S.Carolina needed grammar lessons, the Vatican told us that good Catholics don’t use their cell phones while driving, and Brainspout was temporarily shut down for excessive bandwidth usage (which was very weird since, at that time, I hadn’t posted anything in over 2 years) because several other popular websites started linking to a couple of pictures on this site (THIS ONE and THIS ONE). Also, 2007 was the year when everyone in America started talking about something called a “housing bubble”. Hmmm, wonder what a housing bubble is? More to come…
In 2007 my daughters pet dachshund had to be put to sleep, which was a very difficult day for everyone. On a more positive note, Christmas morning of 2007 we surprised our kids with a trip to Disneyland. This would be the first of three Disney trips in less than 2 years. Does that mean we’re addicted? Probably.
In 2008 the era of Reaganomics finally came to an end as the World Economy went right down the crapper, President Bush popularized the term “Bail Out” by helping a few more friends before he left office, and then America elected, basically, “anybody but Bush”.
I’m not belittling the monumental event that was the 2008 Presidential Election. For the first time in our nation’s history an African-American was elected President of the United States – a truly historic moment. Barack Obama ran a masterful campaign with the messages of Hope and Change. Unfortunately, just like waiting on the cashier at McDonald’s, who is rendered helpless because she can’t find that little picture of a BigMac on her keyboard, a year later and I’m still Hoping for some Change.
I honestly believed that after the hell Bush put this country through, whoever won the Democratic nomination would win this election. John McCain made it all the easier by running a dishonest and inept campaign (very much like the Democrats usually do), finally sealing his fate by selecting an unknown, unqualified punch-line of a running mate from Alaska. Talk about a slam dunk for the Blue Team.
Ahhh, there I go again, DARNIT!
On the bright side, the US economic crash enabled me to buy a new car at 0% interest, so it all worked out in the end. Right?
As for myself in 2009, full of hope that Obama would bail me out, I throw caution to the wind and buy a new house that is far too big and expensive for us. Not to worry, I voted for Obama so I’m sure my bail-out check will be here soon… All kidding aside, we actually did qualify for an $8,000 tax credit, which of course means I did the American thing and am now a proud owner of a big screen TV. I call it my Obama TV. Don’t look at me that way, buying that TV was good for our economy. Plus my hockey games look sooooo good on it.
Alright, it’s painfully obvious that I’m destined to fail in my comeback attempt to steer clear of political land mines, but I’m still gonna’ give it a shot. Also, I’ll try to add a few blog posts covering stuff I missed the last few years, and I promise to do my best to stay on track and focus on my day to day life and family while not mentioning anything to do with politics at all. =) Yea, right.
“George Bush doesn’t care about black people”. – Kanya West
That’s what he said, on live TV. I waste entirely too much of my time bashing Bush, on this blog and in my own personal life. However, honestly, I doubt that Bush has a problem with any specific race. I think it’s more accurate to say that Bush doesn’t like “poor” people, in fact I’m absolutely convinced of it. Other than so many kids from poor families volunteering for military service, Bush couldn’t care less about poor or middle class Americans.
Having said that, I still support the producers of this video and their message. I’m not a Kanya West fan, but there is absolutely no question whatsoever that if Hurricane Katrina had hit the coast of Connecticut, or the San Francisco coast, or anywhere that isn’t primarily poor (and black) we would have seen a totally different response.
I’ve spent the last few days in absolute shock, like many Americans. The city of New Orleans, actually most of southeast Louisiana, has been washed off the map. Hurricane Katrina, a category 5 hurricane, hit the Louisiana / Mississippi coast this weekend bringing with it death and destruction all along the Gulf coast from central Florida to Texas. It appears that no place was more devastated and destroyed than the city of New Orleans.
The news video has been surreal to watch. It reminds me of the way I felt on the morning of Sept. 11th, 2001, watching the video of the jet airliners crashing into the twin towers, it just doesn’t seem possible. How can this really be happening? Are those people really being washed away, right out of their homes? Are those people really swimming down the middle of the street, dead bodies floating past them? What about the people stuck on their rooftops, is there no way to save them? Seriously? There’s nothing we can do? This is America, right? We can do anything we set our minds to, right? That’s still true isn’t it?
When you see those people with a “Support Our Troops” bumper sticker, does it really confuse you when they also have a “I Voted for Bush” bumper sticker? It simply isn’t possible to support both, unless you are completely uninformed and/or a idiot.
Here are a few samples of how the Bush Administration supports our American troops in Iraq:
BUSH HAS ABANDONED NATIONAL GUARD AND RESERVE -
Today President Bush will speak to members of the Idaho National Guard, which has almost 2,000 soldiers currently serving in Iraq. But he won’t talk about how the war in Iraq has stretched the nation’s forces to the breaking point, forcing the military to ask America’s citizen-soldiers to put their lives on hold for increasingly extended periods of time without giving their families the support they need. Bush owes the soldiers and families of the National Guard and Reservists an explanation and an apology. [Wall Street Journal Online, 8/24/05]
GUARDSMEN AND RESERVISTS OVEREXTENDED -
Reservists Make Up Growing Percentage of Active-Duty Troops. In the first year of Operation Iraqi Freedom, Reservists and National Guardsmen made up about 25 percent of troops in Iraq. Currently, Reserve and National Guard members make up an estimated 35 percent of the troops in Iraq. Acknowledging a harsh reality, retired chairman of the Joint Chiefs of Staff Gen. Hugh Shelton, said that the military is becoming heavily reliant on reservists and national guardsmen to maintain commitment abroad. He said “I don’t think we can sustain that much longer.” [Dallas Morning News, 7/31/05; San Francisco Chronicle, 5/9/04; AP, 5/12/04; AP, 5/17/04]
MEMBERS OF NATIONAL GUARD TOOK PAY CUTS TO FIGHT IN IRAQ, THEN HAD TROUBLE GETTING PAID AT ALL -
A January 2004 GAO report studied six different Army Guard units and found Army Guard soldiers were being denied timely and accurate payroll payments. The report found that, “Overall, 450 of the 481 (94 percent) Army Guard soldiers from our six case study units had at least one pay problem associated with their mobilization. In addition, our limited review of the pay experiences of the soldiers in the Colorado Army Guard’s 220th Military Police Company, who are currently deployed to Iraq, indicated that some of the same types of pay problems that we found in our six case study units continued to occur.” [GAO Report, "Army National Guard Personnel Mobilized to Active Duty Experienced Significant Pay Problems," 1/28/04]
Surveys in 2004 showed that 40 percent of reservists and National Guard soldiers make less money while mobilized than they earned in their civilian jobs. Surveys of all Guard and reserve personnel found that among mobilized troops whose pay was cut, the average reduction was $3,000, although some took pay cuts in the tens of thousands. [Washington Post, 11/11/04]
NATIONAL GUARD AND RESERVE SHORTED EQUIPMENT -
In July 2005, the GAO found that “Army Reserve units are not generally allotted all of the equipment they need to deploy.” Since September 11th, commanders have required deploying units to have 90 percent of their required equipment, yet in February 2005 the Army Reserve reported it had about 76 percent of the equipment it requires, an estimate that includes older equipment. [GAO, "An Integrated Plan is Needed to Address Army Reserve Personnel and Equipment Shortages." Rpt # GAO-05-660, 7/12/05]
Already suffering from manpower shortages, the National Guard’s overstretched forces are being confronted with another problem: not enough equipment to supply Guard troops at home. “To fully equip troops in Iraq, the Pentagon has stripped local Guard units of about 24,000 pieces of equipment. That has left Guard units at home, already seriously short of gear.” [Detroit Free Press, 6/13/05]
“Some Army maintenance chiefs, in desperation, are using their own credit cards to make purchases. One soldier, who asked not to be identified, listed boots, goggles and protein bars as particularly coveted items.” [MSNBC.com, 4/15/04]
HEALTH CARE FOR RESERVISTS LIMITED -
Congressman Douglas Hunter, Republican Chairman of the Armed Services Committee, removed a provision from the Defense Department budget that would extend health coverage to all reservists and their families. In an attempt to justify his actions, Hunter stated that, in fact, Reservists and their families have coverage from 90 days before mobilization until at least 120 days after they return, so extended coverage was not needed. [Biloxi Sun Herald, 5/28/05]
If you want to support our troops, please don’t support them the way Bush does…
When I tell people what I think about the miserable excuse for a human our President is, they often tell me that regardless of how I feel about Bush I still need to “show respect for the office“. It appears to me that George W. Bush is the one who has no respect for the office. In fact, I have the utmost respect for the Office of the President of the United States, it’s the imbecile currently residing there I have no respect for.
Now that’s what I call a class act! It’s simply wonderful having a self-proclaimed Christian in the White House. Kinda’ makes you wonder why the rest of the world thinks we’re a bunch of backwards idiots for re-electing this guy, doesn’t it?
——————–
But wait, there’s more!
Our beloved President once again displaying his limitless powers of communication:
Here are a few examples from this past month on how the “Concentration of Wealth Game” is played in the free, democratic society that is America:
Example 1
from the article - Tom Delay headed for hot water after being caught secretly inserting $1.5 billion giveaway into energy bill that would go to the corporate ownership of state energy companies. Also, pay no mind to the $14.5 billion in corporate tax breaks included in the new bill.
Example 2
from the article - The five-member Enron board has approved hefty pay raises for themselves that will up their pay by as much as one million dollars. The Houston-based company revealed the move in a filing with the bankruptcy court that oversaw its reorganization last year. According to the filing, the Enron board said it voted to increase its compensation retroactively. It raises the annual salary of Enron Chairman John Ray the third from 200-thousand dollars to one-point-two million dollars.
I seriously need to consider one of those jobs where I can vote myself a pay raise.
George W. Bush or Saddam Hussein, who do you think has killed more innocent Iraqi citizens? It would seem that Hussein is the greater murderer having been in power for many years, but with Iraqi civilians dying at a rate of more than 800 per month between August and May I have to believe that Bush’s numbers must be closing in – perhaps exceeding the damage Saddam Hussein inflicted. I’m sure the people of Iraq probably understand that, while tragic, their family members deaths are simply the cost of freedom according to the Bush administration…
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Perhaps the only thing more pathetic than giving up on your new blog after only 5 short months, is crawling back after a 5 year hiatus to try and start over. Actually, I suppose one thing even more pathetic would be quitting on your short lived blog because you were so insanely pissed at the political climate you could no longer think straight.
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